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Diageo Gains Majority Control Of India’s USL, Ups Lead In Global Spirits Market

July 2, 2014

After a lengthy struggle, Diageo has succeeded in taking majority control of Indian spirits giant United Spirits Ltd. (USL). Through an open offer to shareholders last month, Diageo added a 26% stake in USL at a cost of £1.1 billion ($1.89b), bringing its total interest in the company to 54.78%. In all, Diageo paid £1.8 billion ($3.1b) to gain its majority share.

While analysts have flagged the price Diageo paid for its USL stake as relatively high—at 32 times forward EBITDA, according to Citigroup—they’ve also noted the vast potential for Diageo to premiumize USL’s business, which currently derives most of its sales from low-priced brands.

“Our announcement today is significant for Diageo,” said CEO Ivan Menezes. “India has now become one of Diageo’s largest markets and will be a major contributor to our growth ambitions.”

According to Impact Databank, USL’s volumes were roughly flat at 125 million cases in 2013. Several key brands, however, were on the rise, including Indian whiskies Hayward’s (up 30% to 9.2 million cases) and McDowell’s No. 1 (up 22% to 23.7 million cases) and McDowell’s VSOP Brandy, up 19% to 2.3 million cases.

With the addition of USL’s volume to its total, Diageo stands as far and away the world’s largest spirits marketer, about twice the size of closest rival Pernod Ricard.

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